Even if you keep your company’s financial records in accordance with the Generally Accepted Accounting Principles (GAAP), the value of key intangible assets may not be clear. Unless, that is, these assets were acquired as part of another business purchase. In fact, GAAP rules state that business owners can’t record the value of internally developed… Continue Reading
If you are looking to appraise a business, you have two basic choices: Hiring a professional business appraiser. Doing your business appraisal yourself. Obviously, professional help comes at a price. But what can you expect to spend to get your business appraised? Business appraisers charge by the hour, with average hourly fees being around $300… Continue Reading
When it comes to valuing a business, the business value number you get is always in today’s dollars. In other words, all business appraisals are done in the present. Yet the key goal of business valuation is to assess the company’s earning potential and risk going forward. In this sense, your business appraisal is always… Continue Reading
Insurance brokerage is a growing business. In the US, for example, there are nearly 220,000 insurance brokerage firms. The industry employs some 1,232,000 people and generates total annual sales of over $355 billion. Most insurance agencies are small businesses with an average staff of 6 and annual revenues of around $1.8 million. These businesses continue… Continue Reading
Need a business valuation for a bar, pub or a microbrewery? Consider this: Over 50,000 bars, pubs, microbreweries and night clubs compete in the US alone. These businesses tend to generate good cash flow and attract loyal customer following, especially if the bar concept focuses on a particular demographic. With health benefits of moderate wine… Continue Reading
While business valuation is hardly black magic, 3 common myths do need dispelling: Myth 1: There is only one way to appraise a business. Not so. In fact, there are three ways, known as approaches, to determine the value of a business. Each has strengths and drawbacks. That’s why a well-prepared business appraisal uses a number… Continue Reading
Hospitality industry continues to grow at a rapid pace. In addition to the major markets including business and luxury hotels, motels and country inns, recent growth has been fueled by the addition of privately owned establishments that tend to focus on lucrative niche markets. These include specialty bed and breakfasts, destination location inns, fitness oriented… Continue Reading
Brand names and trademarks are an important type of business intangible assets. Most successful businesses have these valuable assets in one form or another. Think of business trade names or product and service trademarks used to distinguish business offerings in the competitive market place. As a business builds customer following, the value of its brand names… Continue Reading
Whenever you value a business based on income, you need to address two questions: What are the business earnings likely to be in the future? What level of risk is associated with getting these earnings on time and in full measure? Financial forecasts are a typical way to estimate future business income. The goal is to… Continue Reading
Business owners and buyers often conduct business valuation as part of a successful business sale or purchase. Yet there may be a difference between the economic value of a business and its actual selling price. One key reason is that business valuation does not account for the terms of a business sale directly. You can choose a… Continue Reading
Business valuation methods under the income approach feature prominently in professional business appraisals. These business valuation techniques work because you can determine your business value accurately based on two important factors: business earnings and risk. There are three key assumptions that help make your income-based business valuations highly relevant and accurate: Business people have alternative investment… Continue Reading
In the US alone, business owners and managers spend over $1 billion a year to determine the value of businesses and professional practices. So what are the reasons that prompt business people to conduct business valuation? Here are the most common ones: Buying or selling a business. Gift and estate (ad valorem) taxes. Securing debt or equity financing.… Continue Reading
If you are in an industry where businesses sell often, chances are there is plenty of data to estimate your business value by comparison with similar businesses. A common way to do so is to use the so-called pricing multiples. These pricing multiples are ratios which relate some measure of business financial performance to its… Continue Reading
If you are valuing a company that is going through a period of rapid growth, the Discounted Cash Flow business valuation method should be high on your list of choices. Using this key income-based business valuation method, you can get very accurate results. This is because the discounted cash flow business valuation lets you capture the company’s… Continue Reading
If you expect that your business valuation results will be reviewed by tax authorities, you may need to prepare a business appraisal report that meets several key requirements. In the US, for example, the Internal Revenue Service has published the Revenue Ruling 59-60 in 1960. This central publication outlines a number of requirements that a business… Continue Reading